Recognition of revenue is dependent on the type of financial projects the recognition is done for:

• Recurring Services: the recognize revenue can be determined by calculating the invoice amount for these services in the reporting period. When Service Credits or a potential for having to send a credit invoice for recurring services is likely, the Engagement Manager can either issue an accrual or recognize less revenue and thus create a BIA-position (or lower the WIP-position).
  Revenue for recurring, but also costs, should not vary to much from one to the next reporting period, unless the variation can be directly related to either seasonal patterns or Service Engagement Changes influencing the amount.
• Additional Work: recognition of revenue is to be done using the Percentage Of Completeness (POC%) of the underlying Client IT Change Requests. It is also for this reason an auditable registration of the Client IT Change Requests is necessary, otherwise the Engagement Manager cannot do this quickly and with the necessary level correctness.
  Usually financial projects for additional work have a (large) WIP-position, due to the fact that the revenue is calculated automatically based on the assignment data of employees writing time to the financial projects and invoicing most often is done after the work has been executed and is accepted by the Client.
• Project: revenue recognition follows the same rules as for additional work. In case work is being invoiced to the Client using a payment scheme, then still recognition of revenue must be done on the basis of POC%.

WIP/BIA-positions can only under very specific circumstances be carried over from one fiscal year to a next fiscal year. Therefor it is key for the Engagement Manager to understand how a WIP/BIA-position (WIP/BIA = Revenue -/- Invoices) is build up; not only over time, but also the change in a given reporting period. At best the Engagement Manager has a register in which the development of WIP/BIA-positions is tracked overtime.

Accruals are used to create temporary and ear-marked financial ‘reserves’ for financial transactions that are planned to happen in the near future. The objective of using accruals in the financial management of an Service Engagement, is to represent the development of the financial position of the Service Engagement cleaned from known/planned one-time events. The table below shows what effect can be obtained by creating an accrual.

Accruals can only be created by the financial administration and the Engagement Manager must align with the project controller to have them created.